How much platform competition is too much competition? For example, what is the optimal number of mobile operating systems or video game consoles that will spur competition and innovation in those respective sectors?

It is an interesting business question, but it also has some policy implications since some might propose laws or regulations to remedy a perceived lack of platform competition in various sectors. After all, many people would answer the above question by saying that there is never such a thing as too much competition. The more platforms the better. But there can be costs associated with too much competition. Let's consider those two case studies mentioned above: mobile operating systems or video game consoles.

One one hand, all this platform competition sounds great. But as Ben Worthen of the Wall Street Journal's "Business Tech Blog" points out in a piece today:

there's a new platform war being waged, but this time the battleground is mobile devices. The bad news for businesses looking to standardize on a winner: The most likely outcome is multiple survivors. [...]

In fact, rather than consolidating, the number of platforms for which developers can write mobile-device software keeps growing, says Benjamin Gray, an analyst at Forrester Research. That's a challenge for businesses, in part because workers increasingly want to be able to choose the device that they think is the best fit for their life. In the PC world, the answer would be simple: Write software that people access over the Internet through a Web browser, which isn't dependent on an operating system. But most devices can't connect to the Internet at the speed necessary to run such software, Mr. Gray says. And besides, screen size varies from device to device, meaning that software that looks good on one might not on another.

Add it all together and it means that businesses need to pick and choose their battles. It's probably wise to let workers who only need to access email or software that runs on multiple mobile platforms use whatever device they choose. But it probably won't be cost-effective to give the same choice to workers who have to access custom-developed software through their devices -- not unless a business wants to spend the time and money developing a version of the software for every platform out there.

This is the other side of the platform competition coin that many people never consider, especially in the policy arena. At some point, increased mobile OS competition is going to impose serious costs on application developers looking to push their innovations our far and wide, and as quickly as possible.

Consider a really exciting new mobile application like Loopt, which I have written about here before. Loopt is a great little mobile app that allows users to instantly geo-locate each other and network in ways unimaginable just a few years ago. Loopt has been working hard to make its service available on as many platforms as possible, but the company has to deal with dozens of handsets and a growing number of OS platforms used by multiple carriers. A friend of mine who works with Loopt was telling me this week how this is really making it difficult for Loopt to push its technology out as far and wide as they would like. With each new handset, carrier, and OS standard, the company faces formidable development costs. Essentially, Loopt needs an in-house development team for each standard.

Thus, it is possible to reach a point of diminishing returns in terms of platform competition. While few would call for an mobile operating system monopoly, a world of dozens of competing standards could hurt product development and diffusion.

Video Game Consoles
The same principle applies to video game console competition and its effect on innovation. Some would say that there is already far too much platform competition in this field. Consider the platforms or consoles that game developers must code for just here in the United States: Microsoft Xbox 360 and the older Xbox, Sony PS3 and the old PS2, Sony PlayStation Portable, Nintendo Wii, Nintendo DS, sometimes the Mac, and finally the good old PC platform. Large developers have the scale and resources to develop new games for most of those platforms. (For example, EA's latest "Madden 08" football game is being developed for all of those platforms. But most developers don't have the resources to match Electronic Arts and can't develop for all those platforms.

It is ironic, therefore, that EA has actually been making waves lately by calling for a single gaming platform or standard. Gerhard Florin, a senior executive at EA, told BBC News last year that proliferating platform competition has made life harder for developers and consumers. "We want an open, standard platform which is much easier than having five which are not compatible," he argued.

So, when even Electronic Arts is saying there's too much competition in this regard, you know something is up. After all, it would be in their competitive advantage to absorb the costs associated with multi-platform development since smaller competitors can't match that sort of multi-platform capital outlay.

How steep are those development costs? And what does it mean for both developers and consumers of games? I think Matt Peckman over at PC World has done a pretty good job summarizing the costs:

Just remember, having too many choices can be just as onerous as having none. I don't know about you, but I play games, not hardware. An open-standard approach to the engine under the hood sounds like it'd give me more choices in terms of software and peripherals long term, not fewer.
[...]
A unified game hardware architecture would make life for software studios dramatically easier. It levels the playing field and simultaneously increases competition by pitting more developers against each other. It says "Everyone has access to the same toolset, so you can stop complaining about how hard X is to code for or worrying about allocating resources to different teams for different platforms, and instead simply focus on making really, really, really mind-bending stuff for one system."

Of course, there is another side to the story. Video game platform competition has yielded remarkable innovations at the console level. I can think of at least three ways this is true:

(1) The race to constantly increase processing power: Just look at the competition between Microsoft and Sony to produce state of the art graphical capabilities by packing massive processing power into their the new machines.
(2) Unique innovations in console peripheral devices: If we only had one gaming console or standard, would we have ever seen Nintendo's amazing motion sensitive controller for the Wii?
(3) The race to develop consoles that are not just gaming devices, but are full-blown integrated entertainment hubs. I use my XBox 360 and Sony PS3 to download all sorts of movie and TV content -- especially high-def movies and new movie trailers. I can also use those consoles to ship my media around my house from computer to computer.

But do such benefits outweigh the costs? Would it be the case, as Matt Peckman suggest above, that reallocating resources to single platform development would result in "really, really, really mind-bending stuff for one system"? The problem with that logic is that we already have some really mind-bending stuff being developed for the multiple platforms these days. Think "Gears of War" (exclusive to XBox), "Metal Gear Solid" (exclusive to PS3), and "World of Warcraft" (exclusive to PC). Then again, why should we need to own 3 different platforms to play these 3 wonderfully innovative games?

In sum, there are profound trade-offs at work when we think about platform competition, whether we are talking about video games or mobile operating systems. There is no right answer to the question of how many platforms is too many. Markets decide these things in an evolutionary way over time. I think it is exciting that we are lucky enough to live in a world where intense platform competition is possible and new entrants are free to jump in the game at any time. That being said, I am equally comfortable with the fact that markets might eventually settle for fewer platforms -- perhaps even a single standard -- at other times. So long as that process is the result of natural market evolution, and not artificial government choices, I am fine with it.